The SqlEncryptedPassword value should be generated using the EncryptionUtilities.EncryptString function from the Microsoft.UpdateServices.Internal namespace located into the microsoft.updateservices.common.dll located into the C:\Program Files\Update Services\service\bin folder of your WSUS Server.

If you're not a developer and want to obtain the EncryptedPassword in an easy way, just download the utility from here: EncryptString.zip